The recent federal budget in Australia annouced changes in the income tax rates for 05/06 and 06/07.
See: http://www.treasurer.gov.au/tsr/content/pressreleases/2005/040.asp
How will this affect investment in New Zealand? With the 30% bracket extending up to $63k, will it make NZ trusts less attractive for those earning less than this threshold? Are there other changes hidden in the details of the budget that an Australian investor needs to be aware of?
Andrew
Andrew
The best way to invest in the New Zealand property market is to establish the structures in New Zealand. I believe that one of the greatest benifits in New Zealand is that you can have a seperate income stream to Australia. Therefor you need to look at the structure and then what you are going to buy. The structure we use allows around 4 properties so you need positive cashflow because you do not have an income there.
If you want to negative a property stick to Australia. It is good to have both
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
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nkibel,
why would you say that if you want to negative gear a property stick to Australia?
it is possible to bring some of the losses home to Aus from a negative geared NZ property (the loss incurred if interest payments exceed income).
If a property in NZ is going to have a good likelihood of capital growth but was going to be negatively geared, why not consider that instead of one here that by comparison you think would not have the growth?
Can you tell us why you think that you would not bother with negative gearing in NZ property?
Cheers
CDCheers
CD
CastleDreamer
http://www.nzpropertytogo.comHi Cd
Sorry that is not what I meant. It is important to investy in both countries. If you establish the structures in New Zealand it can be treated as a separate income stream to anything else you own in Australia. If you need to negative gear against your own taxable income in Australia it is more tax effective to do this with an Australian property.
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Originally posted by CastleDreamer:it is possible to bring some of the losses home to Aus from a negative geared NZ property (the loss incurred if interest payments exceed income)
The budget removed foreign loss quarantining altogether, so any foreign losses can now be offset against other Australian income.
At least that’s how I understand it.
GP
basically Nigel is right
The way to do it is with a “NZ resident” structure.
Or onshore/offshore hybridmasteraccountants.co.nz for the former
designertrust.com
for the latterNote though that a foreign-resident structure of itself does not exempt an Australian resident from being taxed on its profits in Australia.
GP
“Australian resident from being taxed on its profits in Australia.”
Yes that’s right hence the recommendation to have a NZ RESIDENT (important difference) structure.
The structure is a separate legal entity which is not you. You live in Australia as a resident for tax purposes, and your entity (not you) lives in NZ (for tax purposes) unless it is settled somewhere else and then it’s different again. Ask your accountant.
Let’s say it’s a trust, you know about trusts, they can have beneficiaries. Are you one? You may well be. You could as a beneficiary get some money out of the trust, if it’s made profits, to you, personal individual living in Australia for tax purposes, and then, yes, you pay tax on it. however if you leave it in the trust and don’t distribute it, it may not be ‘YOUR’ income and therefore ‘YOU’ don’t pay tax on it.
Someone does, of course, but it’s not ‘You’.
If I haven’t explained this properly then please check out a NZ accountant who specialises in investment structures.cheers-
MiniMiniMogul,
Australia has specific tax laws that relate to Australian residents (ie. people) using foreign-resident (including NZ-resident) discretionary trusts and companies.
If someone is an Australian resident for tax purposes, and the trust or company is NZ-resident, that individual may still be taxed on the income of the trust or company whether it gets distributed to them or not. Even if the settlor, trustees, and/or directors are also all NZ-resident and the individual holds no official position within the structure.
It’s mostly all outlined in the Foreign Income Return Form Guide here:
http://www.ato.gov.au/individuals/content.asp?doc=/content/43914.htm
When the structure is not Australian-resident, it mostly comes down to deemed control. And the definition of control is very broad, to the point where it includes almost any influence the individual or his associates might be seen to have (and the definition of associates is also very broad).
This is not to say that it’s impossible to get around the Australian taxation issue, but it’s not as simple as just having a foreign-resident structure.
And with all due respect to NZ accountants and lawyers, I have to say that this is Australian taxation law, which it seems not even many Australian accountants are very familiar with, and I’d personally recommend advice from an Australian taxation lawyer familiar with foreign investment before setting up such a structure.
One of the unfortunate things about the Australian self-assessment system is that you don’t know how many leaks you’ve got in the dam until it floods. It could be rather unpleasant to then find out that the structure doesn’t hold up.
This is of course all just personal opinion based on my own research, and should not be construed as any sort of advice.
GP
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